DLA Piper Survey: CRE Execs on Crowdfunding, Workspace and E-Commerce

Most top CRE executives don’t expect crowdfunding to be a significant source of commercial real estate investment for at least the next three to five years, according to DLA Piper’s latest survey of top commercial real estate officials, now underway.
Jay Epstien

It’s not too late to participate in the survey!

Crowdfunding has been attracting attention, but most top CRE executives don’t expect it to be a significant source of commercial real estate investment for at least the next three to five years. That opinion has emerged from DLA Piper’s latest survey of top commercial real estate officials, now underway.

DLA Piper U.S. Real Estate Practice Chair Jay Epstien said the responses to the crowdfunding question have been the most surprising so far among those received for the annual DLA Piper State of the Market Survey.

“It’s been getting more coverage in the last six to 12 months. Deals are happening,” Epstien said of crowdfunding. “It may not be a significant source, but it’s going to raise money and it’s going to be a player unless someone like the SEC says that’s not going to work.”

The law firm’s survey of CEOs, COOs, CFO and other senior CRE executives, is conducted in conjunction with the DLA Piper Global Real Estate Summit, this year set for Sept. 9 in Chicago. While executives can still participate in the survey (see link at the end of this article), DLA Piper gave Commercial Property Executive an exclusive preview of some of the questions and responses as tabulated so far.

On the crowdfunding question, only 23.71 percent said they agreed or somewhat agreed that it would gain momentum and become a significant source of CRE investment in the next three to five years. More than 30 percent – 31.96 percent, to be specific – said they somewhat disagreed, and 15.46 percent said they disagreed, with 28.87 percent remaining neutral.

Epstien said he would place himself in the “somewhat agree” column.

The crowdfunding question was one of several new ones included in this year’s annual survey. Other new topics addressed flexibility and collaboration in office spaces and how e-tailing may be affecting commercial real estate.

“All of these things affect how people are thinking about using their real estate and how they are investing their capital,” Epstien told CPE.  “How do you invest with the view that the world is changing? How do you protect your long-term capital investments?

“We developed these questions to try and elicit answers on things we’ve all been observing and the dynamics of how space is being used,” Epstien added.

The theme of this year’s summit at the Four Seasons Hotel Chicago is “New Heights New Challenges: Embracing Innovation in a Changing World.”

“We hope the conference will provide tremendous insight into where the real estate world is today and how the leaders view where they’re going in the foreseeable future,” Epstien said.

The questions receiving the highest “agree” or “somewhat agree” responses thus far have addressed flexible and collaborative office spaces. The one that drew the highest combined response – 90.72 percent – asked executives whether they thought the movement toward flexible and collaborative office spaces would drive change in office building development to accommodate evolving requirements for floor plates, HVAC and support areas, et cetera. Of the total respondents, 57.73 percent said they agreed and 32.99 percent said they somewhat agreed.

“You have to start thinking about design of space and how the building and services you’re providing are being influenced,” Epstien said. “Is it a current trend of the month or is it a dynamic shift?”

Also receiving a very high agree/somewhat agree response was a question about whether those spaces move beyond tech-related businesses and entrepreneurs and attract more traditional users of office space. More than half – 52.08 percent – said they agreed and 36.46 percent said they somewhat agreed.

Epstien was not that surprised by the response because the trend he has been seeing in office design is that there are fewer private offices and more clear glass walls to let in more light and encourage collaboration. He also noted that changes in technology have led to smaller office footprints because companies, especially law firms, don’t need as much storage space for files or books because so much of their work is done electronically.

One question asked whether the movement toward flexible and collaborative office spaces supported or dominated by companies such as WeWork, Rocket Space and LiquidSpace would “radically change the complexion of the office leasing market in many cities.” The response was a more muted 6.19 percent agreeing and 26.80 percent somewhat agreeing. Nearly a third – 31.96 percent – took a neutral stance, while 26.80 percent said they somewhat disagreed and 8.25 percent disagreed.

Epstien said those companies shouldn’t be discounted, recalling a recent visit to WeWork’s headquarters in Manhattan, where CEO & co-founder Adam Neumann told him it was leasing more than 1 million square feet around the U.S. and was aiming to eventually be New York City’s biggest tenant.

“There are changes happening out there,” Epstien said. “We want to hear from people making decisions on using space.”

He was not surprised by responses to the question about e-commerce’s impact. Asked whether e-tailing, which comprises about 10 percent of all retail sales today, will fundamentally change the retail real estate sector in the long term, nearly 85 percent of respondents said they agreed or somewhat agreed.

Epstien notes that the impact of e-commerce isn’t just on brick-and-mortar retail stores but on distribution centers that companies like Amazon are increasingly building around the United States to fulfill their orders.

He said the panels at the Sept. 9 summit in Chicago would discuss these topics and more. For further information on the conference, go to www.dlapiperresummit.com. To take the survey, click on the following link: http://research.zarca.com/survey.aspx?k=QTsRWYYsQYTsPsPsP&lang=0&data=)